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Measuring and Decomposing the Distance to the Shapley Wage Function with Limited Data

Listed author(s):
  • Victor Aguiar

    ()

    (Department of Economics, University of Western Ontario)

  • Roland Pongou

    ()

    (Department of Economics, University of Ottawa)

  • Jean-Baptiste Tondji

    ()

    (Department of Economics, University of Ottawa)

Registered author(s):

    We study the Shapley wage function, a wage scheme in which a worker's pay depends both on the number of hours worked and on the output of the firm. We then provide a way to measure the distance of an arbitrary wage scheme to this function in limited datasets. In particular, for a fixed technology and a given supply of labor, this distance is additively decomposable into violations of the classical axioms of efficiency, equal treatment of identical workers, and marginality. The findings have testable implications for the different ways in which popular wage schemes violate basic properties of distributive justice in market organizations. Applications to the linear contract and to other well-known compensation schemes are shown.

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    File URL: http://socialsciences.uottawa.ca/economics/sites/socialsciences.uottawa.ca.economics/files/1613e.pdf
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    Paper provided by University of Ottawa, Department of Economics in its series Working Papers with number 1613e.

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    Length: 48 pages
    Date of creation: 2016
    Handle: RePEc:ott:wpaper:1613e
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    1. Geoffroy de Clippel & Kareen Rozen, 2013. "Fairness through the Lens of Cooperative Game Theory: An Experimental Approach," Cowles Foundation Discussion Papers 1925, Cowles Foundation for Research in Economics, Yale University.
    2. Khmelnitskaya, Anna B., 1999. "Marginalist and efficient values for TU games," Mathematical Social Sciences, Elsevier, vol. 38(1), pages 45-54, July.
    3. Geoffroy de Clippel & Roberto Serrano, 2008. "Marginal Contributions and Externalities in the Value," Econometrica, Econometric Society, vol. 76(6), pages 1413-1436, November.
    4. Roth, Alvin, 2012. "The Shapley Value as a von Neumann-Morgenstern Utility," Economic Policy, Russian Presidential Academy of National Economy and Public Administration, vol. 6, pages 1-9.
    5. Moulin, Herve, 1992. "An Application of the Shapley Value to Fair Division with Money," Econometrica, Econometric Society, vol. 60(6), pages 1331-1349, November.
    6. Hawkins, William B. & Acemoglu, Daron, 2014. "Search with multi-worker firms," Theoretical Economics, Econometric Society, vol. 9(3), September.
    7. Lars A. Stole & Jeffrey Zwiebel, 1996. "Intra-firm Bargaining under Non-binding Contracts," Review of Economic Studies, Oxford University Press, vol. 63(3), pages 375-410.
    8. L. S. Shapley & Martin Shubik, 1967. "Ownership and the Production Function," The Quarterly Journal of Economics, Oxford University Press, vol. 81(1), pages 88-111.
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